Compliance Basic Policy and Compliance Promotion System

Compliance Basic Policy

PLDRM, the Asset Manager, has established the “Compliance Basic Policy” to promote compliance pertaining to its asset management activities regarding NPR based on the “Compliance Rules”, as follows:

• PLDRM recognizes that inadequate compliance could undermine our management foundations. We deem thorough compliance to be one of the most important management issues.
• PLDRM recognizes that we are socially required to carry out our business responsibly as a financial instruments business operator. We are actively and constantly working on compliance in order to increase our business value qualitatively and quantitatively.
• PLDRM tries to contribute to economic and social development by working on compliance activities described in the above 2. and aims to raise the reputation from investors and gain the trust from every stakeholder around the world.

Compliance Promotion System

PLDRM stipulates basic components regarding the compliance system of PLDRM in accordance with the Compliance Rules, the “Compliance Manual” and other rules. PLDRM strictly complies with laws and regulations related to its business, carries out sound and sincere corporate activities, and has established a system to ensure the soundness of management based on self-discipline.
The compliance promotion system consists of the Board of Directors, the Compliance Committee and the Compliance Officer. The Board of Directors formulates basic policies and other basic matters regarding the promotion of compliance, appoints and dismisses an independent member of the Compliance Committee, and formulates and revises the Compliance Manual and compliance programs. The Compliance Committee deliberates on the formulation and revision of the Compliance Manual and compliance programs, and deliberates and resolves other matters related to compliance. The Compliance Officer plans and promotes overall compliance activities as the person in charge of legal compliance.
The Compliance Officer has independent authority in the PLDRM’s decision-making process regarding NPR's asset management, and plays an important role in the compliance promotion system.

1. The following chart summarizes PLDRM’s approval process for formulating and modifying investment guidelines in the investment policy for our assets: 2. The following chart summarizes PLDRM’s approval process for formulation and modification of asset management plans: 3. The following chart summarizes PLDRM’s approval process for acquisitions and dispositions of assets under management:

In order to practice compliance activities, the Compliance Officer formulates and maintains internal rules such as the Compliance Manual as a code of conduct that serves for officers and employees. In addition, the Compliance Officer plans and implements guidance and training for officers and employees on a regular basis or necessarily based on the compliance programs, etc.

Number of compliance trainings conducted based on the compliance program

	CY 2018	CY 2019	CY 2020
Number of Compliance Trainings (Including E-learning)	5	3	4

Rules Regarding Related-Party Transactions

PLDRM has adopted an internal set of rules that apply to all related-party transactions, which include property and security acquisition, disposition and leasing, property management outsourcing, real estate brokerage services outsourcing (such as for trades and leases) or placing construction orders. In order to prevent conflicts of interest, PLDRM shall comply with relevant laws and regulations for all transactions, including with parties other than related parties, and shall not conduct its business in a way which causes conflicts of interest or which undermines our interests when conducting transactions with related parties and shall not conduct unnecessary transactions.

Procedures for Related-Party Transactions

These rules require PLDRM to obtain preliminary approval from the Compliance Officer, who determines whether there is any compliance issue from a compliance viewpoint after reviewing the compliance status of the related-party transactions with the applicable laws, regulations and rules set by NPR and PLDRM, prior to entering into the transactions. The Compliance Committee reviews the proposals under the supervision of the Compliance Officer before the Investment Committee reviews any transaction that could be considered a related-party transaction. Once the Compliance Committee approves, the Investment Committee reviews the proposals. If the Investment Committee approves, then the transactions are entered into and immediately reported to PLDRM’s Board of Directors and NPR’s Board of Directors by the head of the Investment and Operations Division.
All related-party transactions, including acquisition, disposition and leasing of properties and securities, except for transactions as set forth by an enforcement order of the ITA as miscellaneous transactions which would not materially impact us, must be reviewed by the Compliance Committee and obtain consent from NPR based on the approval at a meeting of NPR’s Board of Directors. In addition, other types of transactions must be similarly reviewed by the Compliance Committee and obtain consent from NPR in case the Compliance Officer judges it necessary.

The following chart summarizes PLDRM’s approval process for related-party transactions:

From the perspective of ensuring transparency, related-party transactions are promptly disclosed to the public in an appropriate process in accordance with applicable laws, regulations and related rules.

Internal Audits for the Asset Manager

Internal audits for PLDRM are conducted by the Compliance Officer, who is independent of other divisions, at least once a year for each division, in principle. The Compliance Officer drafts an annual internal audit plan at the beginning of each fiscal period and submits it to PLDRM’s Board of Directors for deliberation and resolution. The Compliance Officer prepares an internal audit report summarizing the results of the internal audits and submits it to PLDRM’s Board of Directors immediately after conducting the audits. Simultaneously, the Compliance Officer shall make recommendations or instructions for improvement to each division, as necessary, based on the results of the internal audits.
In addition, PLDRM’s Board of Directors and the Compliance Officer may conduct an external audit by outside experts if necessary.

Prologis Code of Ethics and Business Conduct

PLDRM requires all officers and employees to annually take and pass evaluations of their understanding of the Prologis Code of Ethics, and to pledge to comply with the Code of Ethics. The Prologis Group holds all employees and board members to the highest ethical standards. The Prologis Group maintains high ethical standards required by a global corporate group by applying the Code of Ethics and Business Conduct to all executives and employees of the Prologis Group. In addition, the Prologis Group constantly provides all officers and employees, including PLDRM’s officers and employees, with various training opportunities to improve their understanding of ethical standards and ethical decision-making ability.
In addition, the Prologis Group, including PLDRM, operates in compliance with the U.S. Foreign Corrupt Practices Act (FCPA), which forbids bribery of foreign officials and concealment of such bribery. To ensure FCPA compliance, the Prologis Group has an enterprise-wide FCPA policy and training program. All Employees are required to notify our Legal Department if they know of or suspect any possible FCPA violation.
Furthermore, the Prologis Group prohibits acts that are suspected of being illegal acts pertaining to politics or government, , as well as entertainment, gifts, bribery, etc. with customers and suppliers that deviate from common sense. All employees always keep these rules in mind and are committed to complying with the Code of Ethics and Business Conduct throughout the Prologis Group.
We clarify that NPR and PLDRM have never provided any political contributions and there were no critical breaches against Prologis’ Code of Ethics.

VIEW PROLOGIS CODE OF ETHICS AND BUSINESS CONDUCT
VIEW NPR’S ESG DATA

Whistle-Blower System in the Prologis Group

The Prologis Group has introduced a whistle-blowing system for providing every employee in the Prologis Group in Japan, including PLDRM, with a safe and comfortable working environment. All employees in Japan can directly contact and consult with the Compliance Officer and the Head of the Personnel and General Administration Division of K.K. Prologis. In addition, the Prologis Group has set up a global whistle-blower system for compliance issues managed by a third party, which ensures anonymity, and all employees in Japan have access to the system at any time.

Safety Helpline

Ensuring the safety of all stakeholders such as customers and suppliers, as well as every employee in the Prologis Group, including PLDRM, is a priority for us. The Prologis Group has established a safety helpline that allows all stakeholders inside and outside NPR, PLDRM and other Prologis Group companies to call out issues that they find at a jobsite or in their work environment where safety practices are not being properly followed. The Safety Helpline is managed by a third party to ensure anonymity.