Basic Concept and Design Status of the Internal Controls System

1.Basic policy of management

The Company's management philosophy is to "contribute to the creation of a prosperous society through the challenge and creation of urban dwelling space." This philosophy also serves as the basic policy for board directors, etc., and employees when executing their duties.
Based on the above management philosophy, the Company recognizes that developing and operating a system for the appropriate execution of duties is an important responsibility of management. In response, we will construct the following internal controls system.

2.System to ensure that execution of duties by board directors and employees of the Company and its subsidiaries complies with laws and the Articles of Incorporation.

・The Internal Audit Office, which is under the direct control of the President and CEO, is in charge of internal audits. The Office conducts periodic business audits based on the annual plan in cooperation with the Audit and Supervisory Committee. In addition to reporting to the President and CEO in regards to whether or not departments and subsidiaries of the Company are executing duties appropriately and smoothly in consideration of laws, Articles of Incorporation, and internal rules, the Office also provides appropriate and effective guidance.

・Strengthening the compliance system of the Company and its subsidiaries is positioned as an important management issue. The Company shall establish a Compliance Committee as a corporate organization that oversees overall compliance. The Committee shall be chaired by the President and CEO of the Company, and shall be composed of members elected from board directors and managers with the rank of general manager or higher. The Committee shall engage in compliance for the Group as a whole.

・The Company shall establish an internal whistleblowing system for compliance violations, and shall establish multiple contact points for direct consultation and reporting regarding compliance. Persons using the internal whistleblowing system shall not be subject to disadvantageous treatment of any kind.

・In order to ensure the reliability of the financial reports of the Company and its subsidiaries, the Accounting Department shall design and operate a system to appropriately establish, evaluate, and report on internal controls applicable to financial reporting.

・The Company shall constantly remain vigilant and have absolutely no relationship with anti-social forces that threaten the order and security of civil society. Response to anti-social forces is defined in the Compliance Manual and Anti-Social Forces Response Manual. The defined response will be thoroughly adhered to by board directors and employees of the Company and its subsidiaries.

3.System for retaining and managing information related to execution of duties by board directors

・In accordance with internal rules for the management of documents, the Company shall retain and manage the minutes from meetings of the Board of Directors, management meetings, etc., as well as documents concerning important decisions and the execution of duties.

・Information management shall be conducted in accordance with the Security Policy of the Company.

4.Rules and other systems for managing the risk of loss by the Company and its subsidiaries

・In order to respond promptly and appropriately to the overall management of business risks at the Company and its subsidiaries, a Crisis Management Committee chaired by the President and CEO of the Company shall be established and shall prepare for various crises.

・In the event of an emergency, the entire Group shall respond in accordance with the Basic Crisis Management Manual.

・With particular emphasis on information security, the Company shall obtain ISO/IEC27001 international certification for our information security management systems (ISMS), and shall establish a permanent Information Security Committee which is in charge of information security throughout the Company.

5.System for ensuring the efficient execution of duties by board directors and employees of the Company and its subsidiaries

・In addition to the regular meetings of the Board of Directors held once a month, extraordinary meetings of the Board of Directors will be held as necessary to determine important matters and supervise the execution status of duties by board directors and employees.

・The Board of Directors shall formulate a medium-term management plan and annual budget, clarify the authority and duties of board directors and employees as required to achieve said plan, and improve the efficiency of business execution.

・In addition to meetings of the Board of Directors, management meetings shall be held as appropriate in order to expedite and optimize deliberations. Based on basic policy as decided by the Board of Directors, managements meetings shall consist of deliberation regarding business execution and plans. Opinions shall be collected and decisions shall be made at the management meetings.

6.System for ensuring the appropriateness of operations at the Company and its subsidiaries / System for reporting matters related to the execution of duties by board directors and employees of subsidiaries

・Based on the Affiliated Company Management Rules, the Company shall engage in appropriate business management of subsidiaries. The medium-term management plans and annual budgets of subsidiaries are approved by the Company's Board of Directors. Progress, performance, financial status, and other important matters of plans are reported at regular meetings of the Board of Directors by subsidiary board directors in attendance.

・The rules and the whistle-blowing system regarding compliance shall be managed as a Group-wide system. Efforts shall be made to increase awareness towards compliance among board directors and employees.

・For subsidiaries, the Internal Audit Office conducts periodic audits and establishes a system to ensure the appropriateness of operations.

7.Matters concerning employees who assist the duties of the Audit and Supervisory Committee, matters concerning the independence of said employees from board directors, and matters concerning ensuring the effectiveness of instructions to such employees

・Staff members responsible for assisting the Audit and Supervisory Committee shall be concurrently assigned from other departments. Said staff members shall assist with the duties of the Audit and Supervisory Committee as appropriate. Furthermore, said staff members will follow the instructions and orders of the Audit and Supervisory Committee with regard to said assistance.

・Consent from the Audit and Supervisory Committee must be obtained in advance for the appointment and transfer of staff members to assist the Audit and Supervisory Committee, thus ensuring the independence of staff members from executive directors.

8.System for reporting to the Audit and Supervisory Committee by board directors and employees of the Company, board directors and employees of the subsidiaries, and auditors / System for preventing disadvantageous treatment of persons who submitted a report / Other systems for ensuring efficient audits by the Audit and Supervisory Committee

・Board directors and employees of the Company, board directors and employees of subsidiaries, and auditors are required to immediately report to the Audit and Supervisory Committee regarding any matters that are important to the business of the Company and subsidiaries.

・Board directors who are members of the Audit and Supervisory Committee shall attend important meetings such as meetings of the Board of Directors and management meetings, and shall provide opinions and ask questions as necessary regarding the inspection of important documents, decision-making processes, and execution of duties.

・The Internal Audit Office shall establish Internal Audit Rules for maintaining close coordination with the Audit and Supervisory Committee, and for ensuring the effectiveness of audits by the Audit and Supervisory Committee.

・The Company prohibits any type of disadvantageous treatment of board directors and employees of the Company, board directors and employees of subsidiaries, and auditors who reported to the Audit and Supervisory Committee. Board directors, etc., of the Company and its subsidiaries are made aware of protection given to reporting persons.

9.Procedures for the advance payment or reimbursement of expenses incurred for the performance of duties by members of the Audit and Supervisory Committee, and other matters related to policies for the treatment of expenses or liabilities incurred for the performance of such duties

・When an Audit and Supervisory Committee Member requests advance payment or reimbursement of expenses incurred for the performance of duties (limited to the execution of duties for the Audit and Supervisory Committee), said expenses or obligations shall be promptly settled, unless deemed as unnecessary for the execution of duties for the Audit and Supervisory Committee.

Basic concept and design status of measures for excluding anti-social forces

The basic policy of the Company is to constantly remain vigilant and have absolutely no relationship with anti-social forces that threaten the order and security of civil society.

The basic policy and specific measures for responding to anti-social forces are defined in the Compliance Manual and Anti-Social Forces Response Manual. Through organizations such as the Compliance Committee, the defined response will be thoroughly adhered to by all Group employees, all of whom shall strive to prevent in advance the formation of any relationships with anti-social forces.

In addition, the General Affairs Department is responsible for controlling anti-social forces. In the unlikely event that there is any contact with anti-social forces (such as an unfair request, etc.), a system shall be established for immediate consultation with a specialized external organization such as the police or a legal advisor, for the implementation of appropriate measures.