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, all of which contribute 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 officers and employees 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 Report_2024/11/29 [PDF：1,236KB]

Corporate Governance Structure

Summary of Boards, Meetings, and Committees

Name	Chairperson	Summary	Number of meetings held (FYE March 2024)
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 execution of duties.	11 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 report and review the status and plans of such operation under the basic policy determined by the Board of Directors.	11 times
Nomination and Remuneration Committee	Outside Director	The committee deliberates on personnel matters, including the election and dismissal of the management team. Matters such as compensation for the management team are also deliberated. The chairperson and the majority of the committee members are Independent Outside Directors.	5 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.	5 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.	4 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.	5 times

Appointment Process for Directors and Audit & Supervisory Board Members

The President prepares a list of candidates for Directors, and the Board of Directors deliberate and make decisions in light of reports on the results of deliberations in the Nomination and Remuneration Committee.
The President prepares a list of candidates for Audit & Supervisory Board Members and gains the consent of the Audit & Supervisory Board in accordance with the provisions of the Companies Act, after which the Board of Directors deliberates and makes decisions.
Appointment or dismissal of the Chairman and the President will be deliberated and decided at the Board of Directors based on the deliberations in the Nomination and Remuneration Committee. With regard to the dismissal of the Chairman or the President, if deemed necessary by the Nomination and Remuneration Committee, the Nomination and Remuneration Committee may exclude Internal Directors from its composition and report to the Board of Directors after seeking opinions of Outside Directors and Outside Audit & Supervisory Board Members.

Members of the Boards (skill matrix and meeting attendance)

	Name			Nomination and Remuneration Committee	Gender	Term of office	Expertise ( ◎ A field for which Outside Officers are particularly expected)
	Name			Nomination and Remuneration Committee	Gender	Term of office	Corporate Management	Finance & Accounting	Legal & Risk Management	Knowledge of real estate businesses	Constructionn	Technology & Energy
Board of Directors	Koichi Minami	Standing		●	Male	8 years	●	●	●	●
	Tsuneo Wakabayashi	Standing		●	Male	3 years	●	●	●	●
	Yoshikazu Asakusa	Standing			Male	ー			●		●	●
	Takashi Yoshida	Outside	Independent	●	Male	7 years		◎	●
	Masao Nomura	Outside	Independent	●	Male	5 years	◎	●	●			◎
	Chiho Takeda	Outside	Independent	●	Female	2 years			◎
	Atushi Miyanoya	Outside	Independent	●	Male	ー		●	●	◎
Audit & Supervisory Board	Shigeru Nishida	Standing			Male	5 years		●	●
	Hideharu Nagasawa	Outside	Independent		Male	3 years	◎	●	●			◎
	Hideyuki Kamijo	Outside	Independent		Male	2 years	●	◎	●	◎

(Note)

The above table does not present a copmlete list of the expertise and experience possessed by each Officer.
The Director, Ms. Chiho Takeda was in office for three years as Outside Audit & Supervisory Board Member of the Company before taking office as Director.
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

(Notes)

"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.
A "business executor" refers to an executive director, corporate officer or executive officer.
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	Tsuneo Wakabayashi	-
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 team, we have established a Nomination and Remuneration Committee. The majority of the 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 that independence and authority of the committee are fully secured because the majority 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	Number of meetings held (FYE March 2024)
	Internal Directors	Outside Directors
Nomination and Remuneration Committee	6 persons	2 persons	4 persons	Outside Director	5 times

Name of the committee

Total committee members

Chairperson

Number of meetings held

(FYE March 2024)

Internal Directors

Outside Directors

Nomination and Remuneration Committee

6 persons

2 persons

4 persons

Outside Director

5 times

Succession Planning

The Nomination and Remuneration Committee believes that members of the top management of the Company need to possess the six qualities presented below in order to execute the Long-Term Business Plan and enhance corporate value, in addition to the basic qualities of "A person trusted by others," "A person capable to seek innovation and efficiency," and "A person with a high level of expertise," which are derived from the Company's corporate philosophy.
Succession planning of top management is an important management issue. At a time of great change in the environment surrounding the Company when it is transforming its structure away from that of a company specializing in the leasing industry, the importance of the Company's top management and its succession plan is increasing. We will continue discussing and examining the matter at the Nomination and Remuneration Committee.

Qualities required of top management
Comprehensive experience and capabilities related to overall management
Leadership
Knowledge of the real estate industry
Empathy with employees
Ability to respond to changes in the market environment, determination, and courage
Human networks in the business community

Remuneration to Officers

Remuneration paid to officers in the fiscal year ended March 2024

Classification		Number of members paid	Subtotal by type of remureration
Classification		Number of members paid	Base remuneration	Performance-linked remuneration	Non-monetary remuneration	Total amount of remuneration
Directors		7 persons	123,870 thousand yen	15,764 thousand yen	43,729 thousand yen	Total amount of remuneration	183,363 thousand yen
	Outside Directors	4 persons	33,600 thousand yen	-	-	33,600 thousand yen
Audit & Supervisory Board Members		3 persons	40,800 thousand yen	-	-	40,800 thousand yen
	Outside Audit & Supervisory Board Members	2 persons	15,600 thousand yen	-	-	15,600 thousand yen

(Notes)

In addition to the above, employee salaries of 18,607 thousand yen are paid to Directors who concurrently serve as employees.
The Company pays bonuses to Directors (excluding Outside Directors and Non-Executive Directors) as performance-linked remuneration. The details of such performance-linked remuneration are as described in "Policy for determining Directors' remuneration."
The Company grants restricted stock remuneration to directors (excluding Outside Directors) as non-monetary remuneration. The details of such stock-based remuneration are as described in "Policy for determining Directors' remuneration."
In determining the details of remuneration to individual Directors for the fiscal year, the Nomination and Remuneration Committee, whose majority is composed of Independent Outside Directors, conducts multifaceted examinations of remuneration proposals, including their consistency with the determination policy. The Board of Directors honors the Committee's recommendations, in principle, and thus judges that they are in line with the determination policy.

Policy for determining Directors' remuneration

The Company determines remuneration to Directors in line with the shareholders' interests so that it will serve as an appropriate incentive leading to a sustainable increase in the shareholder value. As a basic policy, when determining remuneration to individual Directors, the Company aims to secure appropriate levels corresponding to the degree of their responsibilities.
As for the determination policy for remuneration, the Nomination and Remuneration Committee, whose majority is composed of Independent Outside Directors, is consulted, and the Board of Directors resolves it, honoring the Committee's recommendations.

Remuneration system

Executive Directors

It 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 composition of remuneration to individual Directors, where the performance-linked remuneration is set higher for the upper ranking positions reflecting the expected roles for achieving the goals of the Long-Term Business Plan.

Chairman of the Board

It 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 medium- to long-term, despite being not directly involved in business execution.

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.

Bonuses
(performance-linked
remuneration)

It is paid as a bonus at a certain time each year. In the long-term management plan starting with the the fiscal year ended March 31, 2024, we have made diversification of investment methods part of our business strategy and promotion of ESG-conscious sustainability strategies an important measure, and therefore, from the fiscal year ended March 31, 2024, the achievement level of "business profit before depreciation and amortization", "sustainability initiatives" and "ROE" will be used as indicators for calculating performance-linked compensation. The calculation is based on a comprehensive consideration of those as an indicator of the Company's progress in continuously increasing its corporate value and expanding its corporate scale and creating a new earnings model through portfolio expansion. Target performance indicators and their values will be reviewed from time to time based on the consultation and report of the Nomination and Compensation Committee so that they are consistent with the long-term management plan.

(Reference) Actual business profit before depreciation and amortization and the target for the final fiscal year of the Long-Term Business Plan

(million yen)

2022/3	2023/3	2024/3	2033/3 (target)
8,885	9,194	9,128	18,000

Restricted stock

It is granted in the form of restricted stock linked to the shareholder 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

As for the amounts of remuneration, the President will prepare a remuneration plan, consult with the Nomination and Remuneration Committee, and the Board of Directors will deliberate and make decisions on it, honoring the Committee's recommendations. Regarding restricted stock remuneration, the numbers of shares to be allotted to individual Directors will be resolved by the Board of Directors based on the recommendations of the Nomination and Remuneration Committee.

Cross-Shareholdings

Policy on Cross-Shareholdings

We will not have any cross-shareholdings that are not expected to support the Company's sustainable growth and medium to long term enhancement of corporate value. Every year, the Board of Directors will examine the validity of cross-shareholdings in terms of the quantitative
perspectives, such as whether dividends and rental income are commensurate with cost of capital, and the qualitative perspectives found in business relations.
On the other hand, we announced a target to reduce the ratio of cross-shareholdings to net assets from 16.6% at the end of March 2024 to 10% or less by Phase (through the FYE March 2028). Going forward, we will proceed with the sale of them to a certain extent in order to
achieve its targets based on the results of the examination of the validity of cross-shareholdings at the Board of Directors meeting.
As of March 31, 2024, we own 25 listed stocks and seven unlisted stocks. We have divested all shares of eight stocks we had owned as part of our cross-shareholdings policy, also sold part of the shares of three listed stocks. since 2015 when the corporate governance code was
enacted. The total amount of sales during this period was 11.7 billion yen.

Trend in cross-shareholdings of listed companies

		FYE Mar.31, 2020	FYE Mar.31, 2021	FYE Mar.31, 2022	FYE Mar.31, 2023	FYE Mar.31, 2024
Amount recorded on year-end balance sheet (million yen)		12,629	11,910	9,775	9,607	12,449
Amount sold during the fiscal year (million yen)		784	6,530	2,468	1,087	297
Ratio of cross-held shares to net assets (%)		19.7	17.0	13.9	13.6	16.6
Number of listed stocks cross-held	Listed	27	27	26	26	25
Number of listed stocks cross-held	Unlisted	8	8	8	7	7

Criteria for the exercise of voting rights attached to cross-shareholdings

With regard to the exercise of voting rights pertaining to cross-held shares, we make comprehensive judgements before voting for or against, from the perspective of whether or not the investee company is conducting management that leads to the maintenance and improvement of corporate value over the medium to long term in order to meet the expectations of shareholders and other stakeholders.
In the event of any situation at an investee company, such as a protracted slump in the performance, unstable management, or a scandal involving violation of laws and regulations, we carefully examine the purpose of each proposal and vote against any proposal that would harm our interests as a shareholder, whether it is proposed by the investee company or by its shareholder.

Policy and Status of Review Regarding Business Portfolio

Based on our distinct leasing business, encompassing diverse facilities including office buildings, datacenter buildings, WINS buildings (off-track betting parlors), commercial buildings, logistics warehouses, and other properties, we aim for sustainable growth from a medium- to long-term perspective. New investments are made with a focus on regional diversification and location in an effort to minimize the risk of loss in the event of economic fluctuations and disasters. Furthermore, we work to prevent profitability decline such as by reshuffling assets and investing to increase their value.
Under our current business strategies, we place a high priority on maximizing cash flows generated by our business in our efforts to enhance corporate value. We also recognize the importance of achieving returns that exceed capital costs on a profit basis, and the Board of Directors annually examines our business portfolio. Specifically, policies for continuous property ownership, rebuilding, and sales are individually examined at the Board of Directors' Meeting from both a quantitative point of view, such as comparison of capital cost and profitability and investment recovery period, and a qualitative point of view, such as compatibility with investment policy in the business plan and growth potential of the area where the property is located.
Based also on the result of the portfolio examination, we recognize that maximizing profit through revolving assets and improving capital efficiency are necessary to continue to achieve returns that exceed capital costs over the medium- to long-term. In the newly formulated Long-Term Business Plan, we aim to improve capital efficiency through the engagement in revolving-type investment business in addition to the real estate leasing business.

Analysis and Evaluation of the 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 2024, the Company followed the process shown below to analyze and evaluate the effectiveness of the board, and confirmed that the Board of Directors was being operated appropriately overall.
We will continue to engage in enhancing the function of the Board of Directors by implementing periodic analysis and evaluation of the board's effectiveness.

Progress on the issues pointed out in the 2023 survey

Issues pointed out in the past	Details of progress on the issues
Providing opportunities for exchanging opinions between outside officers and executive officers other than at the Board of Directors' Meetings	• Provided opportunities for Outside Directors and executive officers engaged in business operations to meet and talk outside of the Board of Directors' Meetings.
Strengthening the supervisory function of the Board concerning initiatives for sustainability	• Held sustainability training sessions for officers

Main agenda items of the Board of Directors (FYE March 2024)

Matters resolved	Matters reported
• Formulation of Long-Term Business Plan	• Evaluation of the effectiveness of the Board of Directors
• New investments	• Progress with the Long-Term Business Plan
• Important personnel matters (directors, executive officers, and members of the Nomination and Remuneration Committee) and remuneration	• Reports on business execution by various departments
• Examination of validity of cross- shareholdings	• Reports on activities of various committees (Sustainability, Risk Management, Compliance)
• Examination of business portfolio	• Reports on the implementation of internal audits
• Settlement of accounts
• Formulation of Human Rights Policy
• Formulation of sustainability-related policies

Policy on constructive dialogue with shareholders and investoers

Executive Officers responsible for administration are in charge of dialogue between the Company and shareholders/investors. Each department within the Company coordinates with the officers accordingly in providing necessary information to promote constructive engagement between them.
In terms of providing opportunities for dialogue, we have established briefing sessions with the presence of the President or Executive Officers responsible for administration and individual meetings, and issue an integrated report and other IR materials and disclose information on the corporate website as well to help our shareholders and investors to understand our management strategy and business environment better.
The opinions and requests received from shareholders and investors through dialogue are reported to the Board of Directors on a quarterly basis, and dialogue records are always shared among Directors and Audit & Supervisory Board Members. These opinions and requests are valued to further strengthen our dialogue, and relayed to the management and related departments to use for active review of our business strategies.
During the silent period before announcing our financial results, we restrict dialogue with our shareholders and keep the insider information strictly confidential. Information deemed to be a material fact is managed centrally by the Executive Officers responsible for administration to prevent any leaks. We disclose immediately if the information is determined to correspond to information requiring disclosure as well.

Number of dialogues with investors held in the fiscal year ended March 2024

Target	Number of dialogues held (cumulative total)
Coverage analysts	10
Domestic institutional investors	8
Foreign institutional investors	14
Individual investors	6
Total	38

Main topics and concerns of the dialogue

Topics and concerns (FYE March 2024)
• Timeline of the Long-Term Business Plan
• Progress in new businesses and recruitment of personnel
• Disclosure of capital costs
• Improvement of stock price and capital efficiency
• Status of reducing cross-shareholdings
• Strengthening of link between Directors' remuneration and shareholder value

Status of Response

Based on the opinions and suggestions from shareholders and investors, and after discussions at the Board of Directors, we have implemented the following measures.

Measures implemented
• Launched new businesses ahead of schedule
• Disclosed capital costs
• Added ROE achievement level to the KPIs of performance-linked remuneration for Directors
• Promoted recruitment
• Formulated a plan for reducing cross-shareholdings

Training for Directors and Audit & Supervisory Board Members

In order to optimize our business strategies through timely and appropriate decision-making by the Board of Directors, the Company provides Directors and Audit & Supervisory Board Members with opportunities for training related to themes according to the business environment and inspections of the Company's properties. Especially for newly appointed Directors and Audit & Supervisory Board Members, the Company provides trainings on issues such as their legal authority and obligations, also utilizing outside institutions. Whether these opportunities are being appropriately provided is also verified during the annual evaluation of the effectiveness of the Board of Directors.
In FYE March 2024, we held a training session on the theme of sustainability (business and human rights).

At a training session for officers

Status of Coordination between Audit & Supervisory Board Members, Independent Accounting Auditors, and Internal Auditing Division

Audit & Supervisory Board Members regularly receive audit reports from an Independent Accounting Auditor. In addition, Audit & Supervisory Board Members share information with the Independent Accounting Auditor on changes in accounting standards and policies and other matters that may have a significant impact on the Company's business results by holding meetings as necessary.
Audit & Supervisory Board Members share information with the internal auditing division by holding liaison meetings monthly between the Audit & Supervisory Board Member (Standing) and the Audit Department. In addition, the Audit & Supervisory Board receives quarterly internal audit reports directly from the Head of the Audit Department.
In this manner, we strive to improve the effectiveness of audits through close coordination between the Audit & Supervisory Board Members, the Independent Accounting Auditor, and the internal auditing division.

Risk Management

Basic Concept

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

Promotional Framework of Risk Management

The Company established its fundamental policies on risk management measures and responses towards risks surrounding its business 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 risk management on a company-wide basis, based on these regulations.
The committee takes charge of matters including integrated risk management, compilation of response policies, and maintenance and updating of the BCP. It convenes regularly and reports on its activities to the President, as well as the Management Meeting and the Board of Directors if necessary.
In addition, the process for identifying, evaluating, and managing risks related to sustainability issues is shared with the Sustainability Committee to integrate the risk management system on a company-wide basis.

Compliance Committee

We have established a company-wide Compliance Committee under the direct control of the President to comply with laws, regulations, and other social norms, as well as in-house standards, such as our internal rules and to maintain and enhance a sound corporate culture. 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 takes charge of formulating the Behavioral Standards to ensure compliance, assessing the implementation status of compliance measures, and devising recurrence prevention measures against compliance violations. In addition, compliance education and training are provided to employees at all levels through in-house study sessions and other learning opportunities.

Compliance Structure

Compliance with Laws, Regulations, etc., Thorough Practice of Fair Trade and Competition, Prevention of Corruption, and Elimination of Dealings with Antisocial Forces

To prevent misconducts in its business operation, the Company has established the Code of Conduct and Behavioral Standards.

Excerpts from the Code of Conduct and Behavioral Standards
１．We will always adhere strictly to all laws, ordinances and regulations including those 　　relevant to our business as well as our internal regulations, and act with good 　　common sense as a member of society in our daily lives.
２．In all transactions, we will conduct business in a fair and impartial manner based on 　　economic rationality and free competition, and without taking advantage of our 　　superior positions. 　　We will also maintain moderation in the relationships with our business partners.
３．We will maintain healthy and normal relationships with political and administrative 　　persons and organizations, and will not bribe, make illegal political contributions, 　　or offer illegal benefit.
４．We will take a firm stand against anti-social forces and organizations and never offer 　　them any benefit.

Other Initiatives:
Protection of personal information, environmental protection, prohibition of insider trading, respect for human rights, and appropriate handling of information

In-House Reporting System

The Company has established an In-House Reporting System to receive reports from employees and provide consultations on compliance violations. In addition to the in-house contact point, external attorneys have been designated as a contact point, and appropriate measures are taken to prohibit any disadvantageous treatment of individuals who report violations and to ensure that their work environment will not be deteriorated. Moreover, the Board of Directors oversees the status of operation of the system through regular reports by the executive officer in charge to the Board of Directors

Compliance Training

Aiming to increase the compliance awareness of all officers and employees, the Company holds compliance training sessions on a regular basis on such topics as human rights, harassment, insider trading, and information security.

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 if necessary.

Protecting Personal Information

The Company acquires personal information through legal and fair means, and utilizes it only to the extent necessary for its operations, such as business activities, exercise of shareholder rights, and performance of obligations. Personal information obtained is managed strictly and safely, in accordance with regulations stipulated by the Company. We take the necessary and rational measures against unauthorized access from outside and other frauds including leakage, loss, or fabrication of personal information. In case of entrusting personal information to external parties, we strictly supervise and manage the handling of personal information by such trustees.

Measures for major risks

Classification		Description of the risk	Status of risk response
Operating risk	Land and building rental business	Possibility that lower rents and higher vacancy rates may affect the Company's business results due to the impact of economic trends, performance of tenant companies, and fluctuations in building supply and demand Possibility that the business results may fluctuate significantly due to a large amount of real estate acquisition tax or registration license tax at the time of real estate acquisition being recorded as an expense	Minimizing the impact of market fluctuations by developing business with diversified asset types
	Regional concentration	Possibility that the business results may be significantly affected by a large-scale disaster and fluctuations in the supply and demand trends for real estate leasing in the Osaka area due to the concentration of properties in the Kansai area (particularly in Osaka)	More investments outside the Kansai area, mainly in the Tokyo metropolitan area, to reduce the regional concentration risk
	Dependence on specific clients	Possibility that the Company's business results may be impacted by the performance of three clients that provide over 10% of all net sales	Diversify our tenants through development and acquisition of new properties Offering appropriate services and building stronger relationships with tenants in order to reduce risks of major tenants moving out and to maintain and improve our fee levels
	Fluctuation in resource prices	Possibility of increase in operating costs due to higher rates of electricity Possibility of increase in development costs due to higher prices of building materials	Gather appropriate information and disclose the impact
Disaster risk	Natural disasters and man-made disasters	Possibility that our customers, buildings and facilities may be damaged and the 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, or a man-made disaster, such as fire or a terrorist attack)	Renewing our buildings to become compatible with business continuity measures. Strengthening resilience through developing BCP and holding drills.
Disaster risk	Spread of infectious disease	Possibility that the economy may deteriorate and the Company's business results may be adversely affected by the spread of new infectious diseases Possibility that the business activities may be negatively affected by the spread of infection within the Company, which is a disadvantage of a company managed by a small number of staff	Maintaining the health and safety of employees by revising work regulations including on remote work and taking infection prevention measures
Climate change risk	Transition risk	Possibility of increase in costs and tax burden in response to stricter energy conservation regulations and the introduction of a carbon tax	Strengthening efforts to promote energy savings. Introduction of renewable energy.
Climate change risk	Physical risk	Possibility that our customers, buildings and facilities may be damaged and the business results and financial condition may also be affected due to intensification of windstorm or flooding	Reducing the risk of submersion by relocating critical facilities to upper floors and installing flood-control panels Strengthening resilience through preventive maintenance, developing BCP, and holding drills.
Financial risk	Fluctuation in asset values	Possibility that impairment losses may be recognized in the event of a fall in market prices of our assets (such as land, buildings, and investment securities)	Working to prevent profitability decline such as by reshuffling properties and increasing their value. Examining investment securities individually on an annual basis at the Board of Directors Meeting as well as selling securities that are deemed to have little significance.
	Dependency on interest- bearing debt	Possibility of rising interest rates for interest-bearing debts	Leveraging the current low interest environment to reduce and fix the interest rates. Prolonging the average repayment period.
	Amendments to laws, regulations, and tax systems	Possibility that any changes to the laws and regulations related to real estate and construction may restrict the execution of operations in the building lease business and building management business and affect the business results Possibility that changes in tax and accounting systems may affect the Company's business results and financial condition	Gathering appropriate information on related laws, regulations, tax systems, and accounting systems, and disclosing the impact, although it is difficult to avoid the risks
Compliance risk	Violation of laws,regulations,etc.	Loss of social credibility and restrictions on business activities due to compliance violations	Selecting compliance committee members from various departments and regularly verifying the status of initiatives in the departments Using the Compliance Committee to disseminate information on compliance with laws, regulations, etc. through training sessions and other means
Information risk	Information security	Possibility of leakage of information related to our corporate activities and business operations, as well as personal information, through unauthorized access from outside and other frauds Possibility that cyberattacks on in-house systems may disrupt business operations	Implementing security measures to prevent unauthorized access, etc. Asking external parties entrusted with the handling of personal information to disclose the purpose of use and the handling of personal information, and strictly supervising and managing such trustees Establishing an information security management system and conducting training on the handling of information

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.

Management Policy

Corporate Governance

Basic Concept

Corporate Governance Structure

Summary of Boards, Meetings, and Committees

Appointment Process for Directors and Audit & Supervisory Board Members

Members of the Boards (skill matrix and meeting attendance)

Independence Criteria for Independent Outside Officers

Executive Officer System

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

Activity Status of Nomination and Remuneration Committee

Succession Planning

Remuneration to Officers

Policy for determining Directors' remuneration

Cross-Shareholdings

Policy on Cross-Shareholdings

Trend in cross-shareholdings of listed companies

Criteria for the exercise of voting rights attached to cross-shareholdings

Policy and Status of Review Regarding Business Portfolio

Analysis and Evaluation of the Effectiveness of the Board of Directors

Policy on constructive dialogue with shareholders and investoers

Training for Directors and Audit & Supervisory Board Members

Status of Coordination between Audit & Supervisory Board Members, Independent Accounting Auditors, and Internal Auditing Division

Risk Management

Basic Concept

Promotional Framework of Risk Management

Compliance Committee

Compliance Structure

Compliance with Laws, Regulations, etc., Thorough Practice of Fair Trade and Competition, Prevention of Corruption, and Elimination of Dealings with Antisocial Forces

In-House Reporting System

Compliance Training

Audit Department

Protecting Personal Information

Measures for major risks

Disclosure

Basic Concept

Fair and appropriate information disclosure