KONDOTEC recognizes that strengthening and enhancing corporate governance through increasing soundness, transparency and efficiency of management and maximizing corporate value is one of the most important management objectives. To realize this objective, our basic concept of corporate governance calls for reinforcing our compliance and internal audit systems, conducting timely disclosure of management information, operating results and other pieces of information via our website and other means, and strengthening functions for speedy decision-making and management supervision.

KONDOTEC promotes constructive dialogues with shareholders through holding briefings for individual investors and financial results briefings, in addition to the general meeting of shareholders and participating in IR fairs.
We also appoint the Director who manages the General Affairs Division responsible for IR as the Director in charge of IR, and share information with other departments to strengthen cooperation.
In order to reflect the opinions of shareholders on management, when important feedback given from an objective viewpoint arises, we make an effort to report the matter to the Board of Directors as needed.
In addition, KONDOTEC has put in place its IR Policy, which defines the quiet period and other matters, and Internal Information Management Regulations, which set forth rules on communicating important facts and internal information, and performs accordingly in managing information.

• 1. Policy on cross-shareholding
  KONDOTEC maintains cross-held shares for the purpose of contributing to the improvement of corporate value in the medium to long term by maintaining and reinforcing relationships with important business partners.
  KONDOTEC will reduce issues deemed to have insufficient grounds to hold after the verification of cross-held shares.
  * excluding directors who are Audit and Supervisory Committee Members
• 2. Verification on cross-held shares
  Each year, KONDOTEC’s Board of Directors scrutinizes and verifies the purpose of holdings, benefits from transactions, etc., of individual cross-held shares.
  As of March 31, 2023, we held 6 issues of cross-held shares worth 39 million yen in book value and 217 million yen in market value. These are equivalent to 0.1% and 0.7% respectively of net assets of 33,285 million yen, 0.1% and 0.4% respectively of total assets of 58,163 million yen.
• 3. Exercise of voting rights on cross-held shares
  KONDOTEC respects the management policies, strategies, etc., of investee companies, judges individual proposals based on whether shareholding contributes to sustainable growth and medium to long term corporate value of the Company and investee companies, and exercises voting rights.

Type of organization design

Conmany with an Audit & Supervisory Committee

Number of directors
* excluding directors who are Audit and Supervisory Committee Members
(including the number of outside directors)

10 (2)

Number of directors who are Audit and Supervisory Committee Members
(including the number of outside directors)

4 (3)

Term of office of directors
* excluding directors who are Audit and Supervisory Committee Members

1 year

Adoption of executive officer system

Yes

Incentive remuneration

The restricted stock remuneration plan

Accouting Auditor

Deloitte Touche Tohmatsu LLC

KONDOTEC believes that putting in place an Audit & Supervisory Committee and having an audit system where Directors who are Audit & Supervisory Committee Members supervise management is effective and hence operates as a company with an Audit & Supervisory Committee system.
The Audit & Supervisory Committee comprises four Directors who are Audit & Supervisory Committee Members, including one full-time Director, and three part-time Outside Directors with specialist knowledge on finance, accounting and laws, as well as experience in corporate management at other companies, and carries out supervision from an objective and fair point of view.
The Board of Directors holds a regular monthly meeting as well as an extraordinary meeting whenever necessary, promotes efficiency of decision-making for the execution of important business activities and reinforcement of the supervision function.

KONDOTEC’s corporate governance system is shown in the diagram below.

Board of Directors

KONDOTEC holds a meeting of the Board of Directors at least once a month and complies with the policy of addressing all matters provided in the Board of Directors’ Regulations and those corresponding to agenda items to the Board of Directors in making decisions on important matters.
In addition, the Board of Directors receives reports on the status of business execution of KONDOTEC and its subsidiaries from each of the respective directors on a periodic basis and carries out supervision, etc. on the reasonableness and efficiency of business execution.
KONDOTEC conducts the Board of Directors assessment questionnaire based on self-assessments made by all Directors once a year. The Board of Directors deliberates on and considers the results of the questionnaire and makes necessary improvements to secure effectiveness and increase the quality of the Board of Directors as a whole.
KONDOTEC adopts an executive officer system and Executive Officers and Directors in charge of business operations promote speedy business execution.

Outside Directors (excluding Directors who are Audit & Supervisory Committee Members)

KONDOTEC appoints two Outside Directors (one lawyer and one Director with experience in corporate management), who supervise management and offer advice from an objective point of view in consideration of the corporate business community on the whole, including laws and regulations, in an effort to increase the transparency and efficiency of the Board of Directors.

Audit & Supervisory Committee/Outside Directors who are Audit & Supervisory Committee
Members

KONDOTEC adopts the Audit & Supervisory Committee system. The Audit & Supervisory Committee comprises four members, three of whom are Outside Directors (one CPA, one attorney-at-law and one Director with experience in corporate management). The Audit & Supervisory Committee members exchange opinions on audit methods and audit standards from their professional points of view at the meeting of the Audit & Supervisory Committee, which is held at least once a month in order to improve the appropriateness and efficiency of audits. In this manner, we strive to enhance and reinforce our audit system.
Furthermore, the Members receive a report on the results of the accounting audit from the Accounting Auditor at each financial closing. If needed, Directors who are Audit & Supervisory Committee Members accompany the Accounting Auditor in the audit of an office, exchange information and opinions.
Moreover, Audit & Supervisory Committee Members receive reports on financial results for every quarter from internal control sections, as well as reports on other matters related to internal control as necessary.

Internal Audit Department

Our Internal Audit Department is placed as a unit directly under the President. There are three full-time staff members to bolster internal audit operations. These internal auditors audit the status of compliance with laws, regulations and internal rules and the appropriateness and efficiency of business processes, etc. of each division, provide guidance for improvement and perform follow-ups.
In addition, they conduct audits to continuously verify whether the system to ensure the reliability of financial reporting functions appropriately and makes corrections where necessary.
Further, internal Audit Department holds reporting sessions on the findings of internal audits. These are attended by the Representative Director, Directors in charge of content in the reports, and full-time Audit and Supervisory Committee Members.
Moreover, the Accounting Auditor review reports on the results of internal audits and the minutes of debrief meeting conducted by the Internal Audit Department.
Accounting Auditor and internal audit sections exchange information and opinions as necessary, striving to improve the appropriateness and efficiency of audits through close cooperation.

Accounting Auditor

KONDOTEC has appointed Deloitte Touche Tohmatsu LLC as the Accounting Auditor and establishes an environment in which the Accounting Auditor is able to perform audits from a fair and unbiased perspective, by providing the auditor accurate management information in a timely manner.

Compliance & Risk Management Committee

The Compliance & Risk Management Committee is in place.
The Compliance & Risk Management Committee promotes the dissemination of awareness to comply with relevant laws, regulations, corporate ethical standards and internal regulations among all employees and creates a structure to prevent scandals and other problems by developing plans and measures on compliance, including education and guidance for practicing compliance. The Committee also collects information on various risks surrounding KONDOTEC and its subsidiaries and analyzes the information to develop specific preventive measures. It also puts in place a structure to minimize the impact of risks should any such risk becomes apparent, in an effort to reinforce the corporate platform.

Nomination and Compensation Committee

KONDOTEC has established the Nomination and Compensation Committee as a voluntary advisory organization, composed of Independent Outside Directors(excluding Directors who are Audit & Supervisory Committee Members) and the President & Representative Director to strengthen the transparency and objectiveness of the decision-making process for appointment and remuneration of Directors.

Outside Executive members’ Council

The Outside Executive members’ Council comprising Outside Directors has been established. The Council meets periodically to promote the exchange of opinions among outside Executive members.

Terms of Executive members

KONDOTEC appoints candidates for Directors(excluding Directors who are Audit & Supervisory Committee Members) by considering individuals who fulfill respective statutory requirements, who are excellent both in terms of personality and insight, who can carry out their professional responsibilities, and who are capable of making accurate and timely decisions and of cooperating and working with and covering each function and division of the Company. Such individuals are deliberated on by the Nomination and Compensation Committee -- a voluntary advisory organization composed of mainly Independent Outside Directors -- based on whose report the Board of Directors determines a proposal for the General Meeting of Shareholders.
KONDOTEC appoints candidates for Directors who are the Audit & Supervisory Committee Members by considering individuals who have expertise in legal, financial and accounting matters, who hold knowledge on the business activities of the Company, and who maintain diverse perspectives concerning corporate management in a comprehensive manner. Such individuals are deliberated on by the Nomination and Compensation Committee, based on whose report the Board of Directors determines, with prior the consent of the Audit & Supervisory Committee, a proposal for the General Meeting of Shareholders.

Skills Matrix for Directors and Directors who are Audit & Supervisory Committee

Status of attendance by Outside Directors/Outside Audit & Supervisory Committee Members

71th term (April 1, 2022 to March 31, 2023)

Standards and qualities for Independent Outside Directors

KONDOTEC appoints Independent Outside Directors by considering individuals who fulfill the requirements under the Companies Act and the independence standards set forth by the Tokyo Stock Exchange. The Company elects individuals who are capable of carrying out supervision and giving advice based on abundant experience and insights as Outside Directors.
KONDOTEC registers all four Outside Directors as independent Executive members based on the rules of the Tokyo Stock Exchange with the said exchange.

KONDOTEC makes decisions on important matters at the regular meeting of the Board of Directors held every month based on discussions by attendees, including Outside Directors who state their opinions. In this way, we make an effort to heighten the effectiveness of the Board of Directors.
Once a year, we conduct an analysis and assessment of the effectiveness of the Board of Directors as a whole.
In April 2023, we made an assessment of the effectiveness of the Board of Directors. We discussed and made considerations on the results of the assessment at the meeting of the Board of Directors in May 2023.

• 1. Period:  April 2023 to May 2023
• 2. Method: Anonymous self-assessment by all Directors(including outside Executive members)
• 3. Assessment items : Structure and operation of the Board of Directors, deliberation, governance system, promotion digital transformation, initiatives for sustainability, general assessment of the Board of Directors
• 4. Summary of results
  While all executive members have rendered the evaluation that the effectiveness of the Board of Directors overall is ensured, we have received comments to the effect that sustainability initiatives should be appropriately discussed and that Representative Director succession plans should be appropriately discussed and supervised.
  We would like to continue to make improvements based on these opinions.

KONDOTEC offers opportunities for Directors to participate in various training programs, including training sessions and lectures by internal and external instructors, external seminars, and web-based seminars, in an effort to have Executive members gain necessary knowledge and understand/promote duties and responsibilities.