Corporate Governance

About Tokyu Fudosan Holdings

Corporate Governance

(As of December 25, 2018)

Basic Views on Corporate Governance

  1. Basic Views

    In order to fulfill its responsibility to its stakeholders surrounding Tokyu Fudosan Holdings Group (the “Group”), including shareholders, customers, business partners, local communities and employees, Tokyu Fudosan Holdings Corporation (the “Company”) strives to ensure its sustainable growth and increase corporate value over the medium and long term by engaging in social issues through its business. To that end, the Company will work to ensure soundness and transparency of management and build a corporate governance system that contributes to expediting decision making.

  2. Corporate Governance Guidelines

    The purpose of these Guidelines is to serve as guidelines for realization of an optimum corporate governance system, based on society and global management environment, by the Company and its Group.

Organizational Composition

Composition, etc. of the Board of Directors

The Board of Directors in principle meets once every month and whenever needed in order to discuss and make decisions regarding material matters affecting the management the Group. Additionally, the Group Executive Committee meets once every month to deliberate, discuss and report on important proposals and plans pertaining to the Group’s management policy, management strategy, and group management.

Maximum Number of Directors Stipulated in Articles of Incorporation 20
Term of Office Stipulated in Articles of Incorporation 1 year
Number of Directors 13
Among Directors, Number of Outside Directors (Independent Officers) 4 (4)
Among Directors, Number of Female Directors 1
Frequency of Board of Directors Meetings Once a month in principle
Board of Directors Meeting Average Attendance 98%(based on attendance during fiscal year ended March 31, 2018)

Composition, etc. of the Audit & Supervisory Board

Maximum Number of Audit & Supervisory Board Members Stipulated in Articles of Incorporation 5
Number of Audit & Supervisory Board Members 4
Among Audit & Supervisory Board Members, Number of Outside Audit & Supervisory Board Members (Independent Officers) 2 (2)

Disclosure Based on the Principles of the Japan’s Corporate Governance Code

The status and policy of the Company’s measures concerning the main principles of the Corporate Governance Code are as follows.

[Principle 1.4 Policy for Cross-Shareholdings]

ⅰ:Policy regarding shares as cross-shareholdings

The Company will hold cross shareholdings in cases where it judges that they will contribute to maintaining and increasing the Group’s corporate value from a perspective of importance to the medium- and long-term business strategy, reinforcing relationships with business partners, and maintaining a stable fund procurement environment.
 Furthermore, in addition to verifying the appropriateness of each individual shareholding in light of the purpose of said holding, the Company will regularly conduct quantitative verification of matters such as the benefits, risks and capital cost of the holding, and report the results to the Board of Directors.
 Stocks whose holding is deemed to have little meaning or effect will be sold as appropriate, giving due regard to share prices, market trends, and other information for consideration.

ⅱ:Policy regarding exercise of voting rights

The Company will exercise its voting rights related to shares that it has decided to hold on all proposals for voting after carefully examining the details of the proposals in cases such as when the financial soundness of the issuing company has been damaged or when an anti-social scandal has occurred, and judging whether the proposal will contribute to increasing the Group’s shareholder value.

[Principle 1.7 Related Party Transactions]

All transactions with related parties, including officers and major shareholders, are carried out after the required decision has been made through a process of deliberation from specialist perspectives such as finance, accounting, taxation, and law, following the Company’s internal regulations in accordance with the scale and importance of the transaction. Transactions with a conflict of interest for Directors must be approved by the Board of Directors based on laws and regulations, and the Board of Directors Regulations (excluding, however, cases where the transaction is an ordinary transaction as a general consumer, including purchasing over-the-counter goods, where the interests of the Company or the common interests of its shareholders are not harmed).
 When such a transaction has occurred, details are disclosed in the Annual Securities Report in accordance with laws and regulations.

[Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]

The Company accepts employees only from Group companies, and these employees are subject to the retirement benefit plans of the Company they originally joined. Additionally, the retirement benefit plans of each Group company consist primarily of defined contribution pension plans and lump-sum payments.
 Therefore, the corporate pension funds have limitations as asset owners.
 With defined contribution pension plans, the Company confirms operations through selection of fund managers and investment products as well as provision of educational opportunities for employees regarding asset management and explanations at the time of joining the Company. Furthermore, the corporate pension funds conduct proper operation as asset owners by entrusting management to institutions that comply with the stewardship code, while appointing highly experienced managers to be in charge of the operation.

[Principle 3.1 Full Disclosure]

ⅰ:Management philosophy, management strategy, and management plan

The Group conducts business activities founded in the Group philosophy shared by all Tokyu Group companies. It has adopted the business philosophy of “identifying social challenges with the spirit of enterprise and meeting the challenges by implementing projects with ideals and ideas.” The Group has worked to generate new value by adapting to changes in the environment with diversity as its advantage while maintaining its challenging DNA and consideration for customers. The entire Group remains committed to bringing about change with an unswerving conviction by daringly taking anticipatory action before change, and we will continue rising to face the changes of each era. Details can be found on the Company’s website under the “Message from the President.”
Message from the President (English) https://www.tokyu-fudosan-hd.co.jp/english/about/greeting/
Group Philosophy (Japanese): http://www.tokyu.co.jp/company/about/index.html

For details on Value Frontier 2020: To Become a Corporate Group that Continues to Create Value — Stage 2 “Medium-Term Management Plan for 2017 to 2020” disclosed in May 2017, please visit the following URL.
Medium-Term Management Plan (English): https://www.tokyu-fudosan-hd.co.jp/english/ir/mngpolicy/plan/

In addition, the Company issues “Integrated Reports” in an effort to facilitate the understanding by stakeholders of the overall picture of the Group’s progress and creation of value in its business activities.
Integrated Report (English):https://www.tokyu-fudosan-hd.co.jp/english/ir/library/annualreport/

ⅱ:Basic views on corporate governance

For information about the Group’s basic views on corporate governance, please refer to “I. Basic Views on Corporate Governance, Capital Structure, Corporate Attributes and Other Basic Information, 1. Basic Views.”

ⅲ:Policies and procedures in determining the remuneration of the senior management and Directors

Concerning the remuneration for Directors and Audit & Supervisory Board Members, at the 1st Ordinary General Meeting of Shareholders it was resolved that the annual amount of remuneration for Directors shall not exceed ¥600 million, and the annual amount of remuneration for Audit & Supervisory Board Members shall not exceed ¥120 million. Bonuses are also paid within these limits. The Company has also made clearer the link between Director remuneration and stock price, and has introduced a stock-based compensation system based on a resolution at the 4th Ordinary General Meeting of Shareholders to have Directors share profits and risks from stock price fluctuations with shareholders. For the stock-based compensation system, a stock granting trust has been set up for Directors excluding Outside Directors and Managing Officers with whom the Company has concluded mandate contracts, with a maximum of 170,000 shares per year.

In the determination of officer remuneration, the Company aims for a system of remuneration that raises awareness of the contribution of improved medium- and long-term earnings performance to increasing corporate value. Specifically, the Company ensures a certain ratio for the portion of variable remuneration within total remuneration, and remuneration is decided based on the achievement level of key performance indicators (KPIs) in the Medium-Term Management Plan, contribution to achievement of the Plan, and other factors. The Company has also made clearer the link between Director remuneration and stock price, and has introduced a stock-based compensation system within a separate framework to have Directors share profits and risks from stock price fluctuations with shareholders.

Specific methods for determining remuneration are as follows. Within the limits for remuneration amounts approved by the General Meeting of Shareholders, remuneration for Directors is decided at a meeting of the Board of Directors that has been briefed on the results of deliberation by the Nomination and Remuneration Committee. Remuneration for Audit & Supervisory Board Members is decided on the basis of discussion among the Audit & Supervisory Board Members.

ⅳ:Policies and procedures in the appointment or dismissal of the senior management and the nomination of candidates for Directors and Audit & Supervisory Board Members

In selecting candidates for Directors, the Board of Directors presupposes that the candidates have appropriate character and knowledge for a Director, as well as no health issues that would impede them from executing their duties. The Company also gives consideration to the overall balance of the Board of Directors in order for it to be a structure that ensures diversity, including in terms of gender and internationality.

As candidates for Directors from within the Company, personnel who have insight and judgment ability with a view to achieving the management indicators and other objectives in the medium- and long-term management plan are nominated.

As candidates for Outside Directors, personnel who have rich experience in their respective fields, including management, legal affairs, financial affairs and accounting, while having sensible and objective viewpoints, and are capable of proposing and discussing issues concerning growth strategies and enhancement of corporate governance from an independent point of view are nominated.

Appointment of senior management team members and nomination of candidates for Director are decided every year by meetings of the Board of Directors after consulting with the Nomination and Remuneration Committee, which is a voluntary advisory committee chaired by an Independent Outside Director.

The necessary response with regard to the dismissal of the senior management shall be deliberated and decided by the Board of Directors after consulting with the Nomination and Remuneration Committee in the event of any fraudulent or unjust behavior by the senior management, such as violating the details stipulated in the officers’ regulations, or in the event that it is deemed that the person’s qualifications as senior management are markedly lacking.

As for candidates for Audit & Supervisory Board Members, the Audit & Supervisory Board receives proposals of personnel who have appropriate character for an Audit & Supervisory Board Member, as well as having no health issues that would impede them and the insight required for auditing duties, and after the proposal is consented by the Audit & Supervisory Board, the candidates are nominated by the Board of Directors.

ⅴ:Explanations with respect to the individual appointments, dismissals, and nominations

For the reasons for the nomination of Directors, please refer to the “Notice of Convocation of the 5th Ordinary General Meeting of Shareholders.”

Notice of Convocation of the 5th Ordinary General Meeting of Shareholders (Japanese): https://www.tokyu-fudosan-hd.co.jp/ir/stockandbond/generalmeeting/pdf/H_amg2018_1.pdf

Notice of Convocation of the 5th Ordinary General Meeting of Shareholders (English): https://www.tokyu-fudosan-hd.co.jp/english/ir/stockandbond/generalmeeting/pdf/H_amg2018_1.pdf

For the reasons for the nomination of Audit & Supervisory Board Members, please refer to the “Notice of Convocation of the 4th Ordinary General Meeting of Shareholders.”

Notice of Convocation of the 4th Ordinary General Meeting of Shareholders (Japanese): https://www.tokyu-fudosan-hd.co.jp/ir/stockandbond/generalmeeting/pdf/H_amg2017_1.pdf

Notice of Convocation of the 4th Ordinary General Meeting of Shareholders (English): https://www.tokyu-fudosan-hd.co.jp/english/ir/stockandbond/generalmeeting/pdf/H_amg2017_1.pdf

Furthermore, it is the Company’s policy to provide necessary explanations with respect to the dismissal of Directors and Audit & Supervisory Board Members.

[Supplementary Principle 4.1.1]

The Board of Directors develops internal rules such as the Board of Directors Regulations and the Duty Authority Regulations in addition to the matters stipulated in laws and regulations and the Articles of Incorporation. Based on these, the Board of Directors conducts decision-making on important matters related to the Group’s management, such as the management policies, business plans, and large-scale investment plans.

Authority for execution of business and decisions on such execution for matters other than the important matters listed above is delegated to Group Executive Committee and other subordinate meeting bodies, and officers and so forth in charge of the business operations, while the Board of Directors monitors the status of performance of duties of the meeting bodies and officers and so forth.

[Principle 4.8 Effective Use of Independent Outside Directors]

For the Company’s corporate governance, Independent Outside Directors are to have rich experience in management and a high level of discernment and character and related matters, as well as understanding the Group’s wide-ranging business domain and the value they create. They are to provide advice from a broad, high-level perspective, while appropriately supervising executives from a position that is independent from them. The Company recognizes this as an important duty.

To enable appropriate and flexible decision-making on business activities and supervision of execution, the Company considers it advantageous for the Board of Directors to be composed of Directors from inside the Company, who have specialist capabilities and insight about business fields, management plans, personnel, finance and accounting, and so forth, and Independent Outside Directors, who are able to proactively offer opinions on growth strategies and enhancement of governance, and raise concern, from the perspectives of diverse stakeholders and society. The ratio of Independent Outside Directors is approximately 31% under the current system, but the Company is considering ensuring that this ratio is one third or more by 2020.

[Principle 4.9 Independence Standards and Qualification for Independent Outside Directors]

The Company deems Outside Directors to be independent when, in addition to meeting the independence standards for independent officers stipulated by the Tokyo Stock Exchange, none of the following have applied for any of the previous three fiscal years.

1) An executive of a business partner to which the Company’s net sales account for 2% or more of the Company’s consolidated net sales
2) An executive of a business partner whose net sales to the Company account for 2% or more of the business partner’s net sales
3) An executive of a lender from which the Company borrows funds that account for 2% or more of the Company’s consolidated total assets
4) An executive of a major shareholder or investor of the Company with an investment ratio of 10% or more
5) A consultant, accounting professional, or legal professional who receives remuneration of more than ¥10 million a year from the Company besides officer remuneration
6) A spouse or relative within two degrees of kinship of the Director, etc. of the Company or a consolidated subsidiary

[Supplementary Principle 4.11.1]

When deciding on candidates for Directors, the Company considers the balance of personnel able to exercise strengths in management in each of the fields within the Group’s wide-ranging business domain and personnel suited for corporate management and so forth, and seeks to secure a balance and diversity of the overall knowledge, experience, and capabilities of the Board of Directors.

Considering the Group’s wide-ranging business domains, the Company considers the current structure with the number of Directors at around 13 to be appropriate. However, there is a possibility that the structure may change, for example by increasing the number of Independent Outside Directors in order to strengthen the governance structure going forward.

Selection of senior management team members and nomination of candidates for Director are decided every year by meetings of the Board of Directors after consulting with the Nomination and Remuneration Committee chaired by an Independent Outside Director.

[Supplementary Principle 4.11.2]

The notice of convocation of the Ordinary General Meeting of Shareholders for each year lists the status of any significant concurrent positions outside the Company of officers. The notices of convocation of the Ordinary General Meeting of Shareholders can be viewed on the Company’s website.

Relevant information on meeting of shareholders (English):
https://www.tokyu-fudosan-hd.co.jp/english/ir/stockandbond/generalmeeting/

[Supplementary Principle 4-11-3]

The evaluation of the effectiveness of the Board of Directors is conducted every year, and the appraisals and opinions regarding the effectiveness of individual Directors and Audit & Supervisory Board Members are reported and shared at meetings of the Board of Directors. Regarding matters where changes are needed to further improve effectiveness, continuous verification of remedial progress is undertaken within the annual appraisal of effectiveness. For example, in response to an opinion and evaluation that the method and timing of information provision to each officer was unsatisfactory, necessary reviews were implemented. As a result, the evaluation conducted in the following year showed improvement in effectiveness. The latest evaluation showed that the effectiveness of the Board of Directors has been achieved, but the Company will continue working to further enhance its effectiveness.

[Supplementary Principle 4.14.2]

To promote understanding of the roles and responsibilities required of the Directors and the Audit & Supervisory Board Members, the Company provides opportunities such as external training and seminars for corporate managers so they may acquire necessary knowledge on the Company’s business, finances, organization, compliance, and other matters as well as necessary knowledge related to education that they should receive as Directors and Audit & Supervisory Board Members. Moreover, Outside officers are given clear explanations of the management strategy and business activities as appropriate at the time of and after their appointment in order to promote their understanding of the Group.

[Principle 5.1 Policy for Dialogue with Shareholders]

The Company proactively conducts IR activities to promote constructive dialogue with its shareholders. Please refer to the Company’s IR Policy for details including its initiatives and policies.

IR policy (English): https://www.tokyu-fudosan-hd.co.jp/english/ir/policy/

For further reference, the Company’s website also has information on the Group’s disclosure items and so forth based on the respective principles of the Japan’s Corporate Governance Code.

Corporate Governance Code (English): https://www.tokyu-fudosan-hd.co.jp/english/about/governance/

The Company is working on constructive dialogue with shareholders and investors in order to contribute to sustainable growth and the increase of corporate value over the medium and long term. In addition to individual interviews, the Company is proactively working on dialogue by the President, officers in charge and divisions in charge, including through regular investor briefings for analysts and institutional investors as well as regular investor briefings for individual investors. The Company periodically reports the opinions of shareholders and investors obtained through this dialogue to the Board of Directors, and uses them to improve management.

Basic Views on Internal Control System

The Group has taken active steps to put in place and implement internal control systems for all members of the Group, including the Board of Directors and other organizations, managements and employees, with the aims of thoroughly implementing compliance-based management, ensuring proper business operations, achieving management priorities such as earnings targets by raising the levels of efficiency and effectiveness, as well as practicing appropriate disclosure of information; all of which will contribute to the sustainable development of the Group and the consistent improvement of its corporate value.

In addition, Statutory Auditors are monitoring and validating the progress of its internal control system development in accordance with the Audit Practice Standards for Internal Control Systems.

Schematic Diagram of Corporate Governance System

The Company has adopted a form of a Company with Statutory Auditors as the Corporate Governance System and an overview of this is shown below.

Schematic Diagram of Corporate Governance System

Management Monitoring Function

1. Adoption of Audit & Supervisory Board Member System The Company adopts the Audit & Supervisory Board Member System. In addition to attending important meetings such as those of the Board of Directors to receive reports on business from Directors, etc., the Audit & Supervisory Board Members peruse documentation on important decisions and listen to reports and so forth from the Internal Audit Department and subsidiaries, etc., and Accounting Auditor in order to carry out auditing of the status of business execution at the Company and its subsidiaries, etc. The Audit & Supervisory Board Members form fair audit opinions by accurately grasping information based on on-site visits for auditing and other activities conducted by mainly the full-time Audit & Supervisory Board Members and effectively carry out auditing of the Directors’ performance of duties as an independent body with mandate from the shareholders by utilizing the mobility and flexibility of the Audit & Supervisory Board Member System.
2.Introduction of Executive Officer System In addition to mandatory functions such as the General Meeting of Shareholders, the Board of Directors, and the Board of Corporate Auditors, the Company will introduce the “Executive Officer System” as a measure to strengthen corporate governance. In the Company’s efforts to strengthen governance functions, while the Directors will undertake the functions of management decision-making and business execution monitoring, the Executive Officers will undertake the role of business execution.
3.Execution of Internal Audits The Company has established the Internal Audit Department to review and evaluate the administrative and operational management system and the status of business execution in terms of their legality and rationality from a fair and objective standpoint, and carry out internal auditing of the Company and its subsidiaries, etc.

Relationships with Outside Officers

An overview of the Company’s relationship with Outside Officers is as follows.

Title and Name Title and Name of Other Major Company Where Outside Officer Concurrently Serves
(As of July 10, 2018)
Relationships with the Company and Appointment
Director
Koichi Iki
  The Company has appointed Mr. Iki as an Outside Director in the hope that he will utilize his extensive experience as an executive at The Dai-ichi Life Group and broad discernment for the management of the Company. No special interests exist between Mr. Iki and the Company.
As an Outside Director, Mr. Iki plays a role in strengthening the function of supervising the Board of Directors, etc. from an objective standpoint, and it is not expected that any conflict of interest with general shareholders will arise in the future.
Director
Makoto Kaiami
Outside Director,
FUJIFILM Holdings Corporation

Outside Audit & Supervisory Board Member,
SEIREN CO., LTD.
The Company has appointed Mr. Kaiami as an Outside Director in the hope that he will utilize his expert insight as a judge and attorney at law and extensive experience in corporate legal affairs for the management of the Company. Neither legal advisory contract nor special interests exist between Mr. Kaiami and the Company.
As an Outside Director, Mr. Kaiami plays a role in strengthening the function of supervising the Board of Directors, etc., from an objective standpoint, and it is not expected that any conflict of interest with general shareholders will arise in the future.
Director
Shun Sakurai
Executive Officer,
DENTSU INC.
The Company has appointed Mr. Sakurai as an Outside Director in the hope that he will utilize his extensive experience and broad knowledge in administration for the management of the Company. No special interests exist between Mr. Sakurai and the Company.
As an Outside Director, Mr. Sakurai plays a role in strengthening the function of supervising the Board of Directors, etc., from an objective standpoint, and it is not expected that any conflict of interest with general shareholders will arise in the future.
Director
Saeko Arai
Representative,
Acuray, Inc.

Outside Member, Board of Directors,
Sumitomo Dainippon Pharma Co., Ltd.
The Company has appointed Ms. Arai as an Outside Director in the hope that she will utilize her broad knowledge in accounting as a certified public accountant as well as her extensive experience in corporate management as a CFO for the management of the Company. No special interests exist between Ms. Arai and the Company.
As an Outside Director, Ms. Arai plays a role in strengthening the function of supervising the Board of Directors, etc., from an objective standpoint, and it is not expected that any conflict of interest with general shareholders will arise in the future.
Audit & Supervisory Board Member
Tomoyasu Asano
President, The Cardiovascular Institute
(Public Interest Incorporated Foundation)

Outside Corporate Auditor, Seiko Holdings Corporation
The Company has appointed Mr. Asano as an Outside Audit & Supervisory Board Member in the hope that he will utilize his extensive experience as an executive at The Dai-ichi Life Group and broad discernment of corporate management for the surveillance system of the Company. As an Outside Audit & Supervisory Board Member, Mr. Asano plays a role in the function of monitoring the management, etc. from an objective standpoint, and it is not expected that any conflict of interest with general shareholders will arise in the future.
Audit & Supervisory Board Member
Katsunori Takechi
Outside Audit & Supervisory Board Member, DIC Corporation The Company has appointed Mr. Takechi as an Outside Audit & Supervisory Board Member in the hope that he will utilize his specialized insight as an attorney at law and extensive experience regarding corporate legal affairs for the surveillance system of the Company. Additionally, there are no advisory agreements between Mr. Takechi and the Company.
Mr. Takechi is engaged in the tax accountancy business as a certified tax accountant under Article 51 of the Certified Public Tax Accountant Act, and has considerable knowledge regarding finance and accounting.
As an Outside Audit & Supervisory Board Member, Mr. Takechi plays a role in the function of monitoring the management, etc. from an objective standpoint, and it is not expected that any conflict of interest with general shareholders will arise in the future.

Supporting System for Outside Officers

Outside Directors and Outside Audit & Supervisory Board Members are given clear explanations of management strategy and business activities upon assuming their positions in order to promote their understanding of the Group. Moreover, the Office of Corporate Auditors, which is an organization independent from the business executives, provides support to the Outside Audit & Supervisory Board Members to help them smoothly fulfill their auditing duties. And, in addition to being given appropriate information from the Board of Directors Administrative Bureau (Group General Administration Department) and other departments, the Outside Directors are given information as the situation dictates.

Protection of shareholders

There were no major shareholders with shareholdings of 30% or more in the Company. View the following link for more information about the status of shareholders.
https://www.tokyu-fudosan-hd.co.jp/english/ir/stockandbond/shareholders/index.html

Issuance of new shares

After the end of the fiscal year, the total number of shares issued increased by 71,158,000 shares as the result of the issuance of new shares with a payment date of October 29, 2018. Additionally, the total number of shares issued increased by 7,842,000 shares due to a capital increase through third-party allotment with Nomura Securities Co., Ltd. as an allottee, with a payment date of November 27, 2018. As a result, the total number of the Company’s shares issued increased to 719,830,974 shares.

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