Ki Star Real Estate : ［Delayed］Corporate Governance Report

Corporate Governance Report

.KI-STAR REAL ESTATE CO.,LTD

Last update: June 27, 2022

KI-STAR REAL ESTATE CO., LTD.

Keiji Hanawa, President and Representative Director

Contact for inquiry: President's Office 0495-27-2525

Securities Code: 3465

https://ki-group.co.jp/

Our Company's corporate governance is reported as follows.

I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information

1. Basic Views

Our Management Philosophy is to be a "Yu-Ta-Ka Creation Company" that delivers fulfilling, enjoyable, and pleasant lifestyles in the world (the meaning of the phrase Yu-Ta-Ka), and as a company that provides "high-quality but low-cost design housing," we aim to fulfill our social responsibility and earn the trust of all our stakeholders, including customers, shareholders, business partners, local communities, and employees. To this end, we have positioned the enhancement of corporate governance as the most important management issue. We have established a system to strengthen the management supervision function by the Board of Directors, Audit and Supervisory Board, etc. The Corporate Code of Conduct and Basic Compliance Policy stipulate that the Company shall not only comply with laws and regulations, but also act in accordance with internal rules, social norms, and ethical standards, thereby realizing compliance management and ensuring sound and transparent management through prompt and accurate decision-making.

[Reasons for Non-compliance with the Principles of Corporate Governance Code] Updated

[Principle 2-4: Ensure diversity within the company, including the promotion of women] Supplementary Principle-1

At our Company, we have traditionally worked to promote people to managerial positions by emphasizing ability and performance regardless of gender or nationality, and have promoted many women and mid-career hires to management positions. In particular, we are actively striving to achieve the set target (15%) for the number of women in management positions, but currently the percentage remains at 7%. We will continue with efforts to educate employees toward this goal.

One non-Japanese employee was appointed Section Manager this fiscal year, and a specified skilled trainee was appointed Manager to provide guidance and education to trainees.

We have been hiring highly skilled personnel since this fiscal year and will actively promote appropriate personnel to management positions.

As a mid- to long-term human resource strategy, the "KI Academy," a two-week training program for mid-career hires, is conducted to ensure legal compliance and to create a training environment that will enable them to become an immediate workforce. It is our aim to hire 300 mid- career employees every year to further expand the scale of our business.

[Principle 2-6: Functioning as asset owner of corporate pension plan]

At our Company, we do not have a corporate pension plan and do not plan to establish one at this point, but if it is deemed necessary in the future, we will establish a system for us to fulfill the asset owner function.

[Principle 3-1: Ensuring appropriate disclosure and transparency] Supplementary Principle-3

Our Group actively addresses all social issues in Japan and overseas, and contributes to the creation of a sustainable and prosperous society through the creation of a living environment where people can live happily. In June 2021, the Sustainability Promotion Office was established, and in May 2022, the Sustainability Committee was set up to improve internal governance, solve social issues in Japan and overseas, address environmental issues, human rights issues, and issues and measures to maintain and improve compliance. The committee reports to management on measures to be taken, and promotes sustainability measures through each business unit and organization. The TCFD or a similar framework will be addressed in the future, based on consideration by the Sustainability Committee. In addition, our corporate Sustainability Policy, Materiality, etc. are posted on our website.

(https://ki-group.co.jp/company/sustainability/)

[Principle 4-1: Roles and responsibilities of the Board of Directors-1] Supplementary Principle-2

Although we do not currently have a Medium-term Management Plan, our vision and the concept of the process leading to that vision are published in the "IR Information" section of our corporate website that is considered to be our management strategy and plan.

[Principle 4-1: Roles and responsibilities of the Board of Directors-1] Supplementary Principle-3

Currently, our Company does not have a specific succession plan for the CEO and others, but is considering the formulation of a plan and a mechanism for its supervision in the future.

[Principle 4-10: Use of optional mechanisms] Supplementary Principle-1

Our Company has three independent outside Directors and two independent outside Audit and Supervisory Board Members. Although the number of independent outside Directors is less than one-third of its total number, we believe that the monitoring and supervision of management is functioning adequately. The composition of the Board of Directors will continue to be considered in the future.

[Principle 4-13: Information acquisition and support system] Supplementary Principle-3

The Internal Audit Office reports to the Board of Directors on the internal audit plan at the beginning of period, and is considering reporting on the preliminary audit results and the status of follow-up audits in the future. In addition, in order to strengthen cooperation between outside Directors, outside Audit and Supervisory Board Members and the Internal Audit Office, we will consider improving the attendance of the General Manager of the Internal Audit Office at the Audit and Supervisory Board and the independent outside Officers' meetings, etc.

[Disclosure Based on the Principles of the Corporate Governance Code] Updated

Matters to be disclosed under the Corporate Governance Code are being properly performed as follows. [Principle 1-4: Strategic shareholding policy]

Our Company's policy is to maintain and strengthen medium- to long-term business strategies and relationships. In addition, quantitative holding effects are confirmed by the amount of financial transactions (continuation, maintenance, etc.).

[Principle 1-7: Transactions with related parties]

At our Company, conflict of interest and competitive transactions by Directors are resolved by the Board of Directors. With regard to transactions between related parties, each time such transactions are likely to occur, our Company will consider whether the transaction will not damage the soundness of our management, the common interests of shareholders will not be harmed, it is valid in light of rational judgment, the

transaction terms are appropriate in comparison with other external transactions, etc. Then, the President's Office and General Affairs Department consult with each other, obtaining opinions from Audit and Supervisory Board Members and the Internal Audit Office as necessary. In addition, our Company complies with the Subsidiary Management Regulations, which stipulate that transactions within our Group shall not mutually cause any disadvantage. With regard to Directors and Audit and Supervisory Board Members, the Company requests in writing in April of each year information on any transactions with them and their related parties, as well as the details, amount, etc. of such transactions. The Company also comprehensively confirms any transactions by searching accounting data and other sources.

[Principle 2-4: Ensure diversity within the company, including the promotion of women] Supplementary Principle-1 As stated in the above [Reasons for Non-compliance with the Principles of Corporate Governance Code]. [Principle 2-6: Functioning as asset owner of corporate pension plan]

As stated in the above [Reasons for Non-compliance with the Principles of Corporate Governance Code]. [Principle 3-1: Enhancement of information disclosure]

(1) Management Philosophy, etc.

Our Company has established the Management Philosophy, Basic Compliance Policy, etc., as described in the "Basic Views" section of this report, and has posted them on the corporate website.

(2) Basic views and policy on Corporate Governance

The concept of Corporate Governance is as described in the "Basic Views" in this Report. A basic policy on Corporate Governance is organized and determined after all principles of the Corporate Governance Code are specifically considered.

1. Policies and procedures for determining Directors' Remuneration They are described in the "Directors' Remuneration" section of this Report.
2. Policies and procedures for nominating candidates for Directors and Audit & Supervisory Board Members

Candidates for Directors of our Company are selected by the Board of Directors in accordance with the Director Selection Criteria established by our Company. In addition, Audit and Supervisory Board Members are selected with the consent of the Audit and Supervisory Board, on condition that the candidates have sufficient knowledge of business management and accounting and are expected to conduct appropriate audits.

1. Explanation of individual cases of appointment/dismissal and nomination when nominating candidates for Directors and Audit & Supervisory Board Members

For Directors elected this fiscal year, the reasons for their appointment are stated in the Reference Document for the General Shareholders Meeting. As the next General Shareholders Meeting will decide the election of all Directors and Audit and Supervisory Board Members, the reasons for their election are planned to be included in the Reference Document for the General Shareholders Meetings.

[Principle 3-1: Enhancement of information disclosure] Supplementary Principle-3

Our Group actively addresses all social issues in Japan and overseas, and contributes to the creation of a sustainable and prosperous society through the creation of a living environment where people can live happily. In June 2021, the Sustainability Promotion Office was established, and in May 2022, the Sustainability Committee was set up to improve internal governance, solve social issues in Japan and overseas, address environmental issues, human rights issues, and resolve issues and measures to maintain and improve compliance. The committee reports to management on measures to be taken, and promotes sustainability measures through each business unit and organization. Our corporate Sustainability Policy, Materiality, etc. are posted on our website. （https://ki-group.co.jp/company/sustainability/）

[Principle 4-1: Roles and responsibilities of the Board of Directors-1] Supplementary Principle-1

Matters to be resolved are decided by the resolution of the Board of Directors with specific standards for submission and reporting based on their degree of importance. In addition, a system has been established whereby the authorities and division of duties related to business execution are clarified by internal rules and are reviewed in accordance with organizational changes, etc.

[Principle 4-9: Criteria and qualities for determining the independence of independent outside Directors]

Our Company has established independence criteria for outside officers (outside Directors and outside Audit and Supervisory Board Members) with reference to the Guidelines for Listing Controls, Etc. established by the Tokyo Stock Exchange. As for qualifications, as candidates to be appointed as outside Directors we select people who are able to offer their opinions from a professional viewpoint and independent of the execution of business based on their knowledge of corporate law and practice or broad insight based on their experience as management, etc.

[Principle 4-10: Use of optional mechanisms] Supplementary Principle-1

As stated in the above [Reasons for Non-compliance with the Principles of Corporate Governance Code].

[Principle 4-11: Prerequisites for ensuring effectiveness of the Board of Directors and Audit and Supervisory Board] Supplementary Principle-1

In order to ensure that each Director, regardless of holding concurrent positions, can properly fulfill their roles and responsibilities, our Company makes early decisions and notifies the Board of Directors and Audit and Supervisory Board of their annual schedule, while promptly distributing materials (in principle, three days prior to the meeting) to promote active discussions at the Board of Directors meetings. Furthermore, the status of concurrent positions is disclosed annually in the Convocation Notice of the General Shareholders Meeting.

[Principle 4-11: Prerequisites for ensuring effectiveness of the Board of Directors and Audit and Supervisory Board] Supplementary Principle-2

In order to ensure that each Director, regardless of holding concurrent positions, can properly fulfill their roles and responsibilities, our Company makes early decisions and notifies the Board of Directors and Audit and Supervisory Board of their annual schedule, while promptly distributing materials (in principle, three days prior to the meeting) to promote active discussions at the Board of Directors meetings. Furthermore, the status of concurrent positions is disclosed annually in the Convocation Notice of the General Shareholders Meeting.

[Principle 4-11: Prerequisites for ensuring effectiveness of the Board of Directors and Audit and Supervisory Board] Supplementary Principle-3

At the beginning of each fiscal year, our Company conducts a self-assessment of the effectiveness of the Board of Directors by all Directors and Audit and Supervisory Board Members. The Board of Directors will further enhance its effectiveness through consultation at the Board of Directors considering this analysis and assessment.

[Principle 4-14: Training for Director and Audit and Supervisory Board Members] Supplementary Principle-2

In addition to sharing basic information (management strategy, financial strategy, etc.) within our Company, Directors and Audit and Supervisory Board Members share knowledge and information necessary to perform their duties through active discussions and information exchange at the Management Meetings and Group Management Meetings, and by attending external seminars.

[Principle 5-1: Policy on constructive dialogue with shareholders]

Our Company's dialogue with shareholders is conducted by the Accounting & Finance Division, which takes the lead in exchanging information with the relevant divisions as appropriate. Material information necessary for investment decisions is disclosed in a timely and proper manner in accordance with the timely disclosure rules of the Tokyo Stock Exchange, and is promptly posted on our corporate website after the timely disclosure.

2. Capital Structure

Foreign Shareholding Ratio10% or more but less than 20%

[Status of Major Shareholders] Updated

	Name or Company Name				Number of Shares Owned	Percentage (%)
	Keiji Hanawa				3,669,000	23.13
	Flowering Co., Ltd.				3,426,000	21.60
	The Master Trust Bank of Japan, Ltd. (Trust Account)	1,205,600	7.60
	Custody Bank of Japan, Ltd. (Trust Account)				656,700	4.14
	J. P. MORGAN CHASE BANK 385632				528,356	3.33
	BNY GCM CLIENT ACCOUNT JPRD AC ISG(FE-AC)	214,514	1.35
	The Ashikaga Bank, Ltd.				206,000	1.29
	THE BANK OF NEW YORK MELLON 14044				174,800	1.10
	Saitama Resona Bank, Limited				128,000	0.80
	The Gunma Bank, Ltd.				128,000	0.80
		Name of Controlling Shareholder, if applicable				---
		(excluding Parent Company)
		Name of Parent Company, if applicable				---

Supplementary Explanation

Keiji Hanawa, President and Representative Director of our Company, corresponds to the "owner" and is a shareholder of Flowering Co., Ltd. and assumes the office of President and Representative Director.

3. Corporate Attributes

Stock Exchange and Market Segment Listed On Updated

Fiscal Year-End

Business Sector

Number of Employees (Consolidated) as of theEnd of the Previous Fiscal Year

Net Sales (Consolidated) as of the End of the Previous Fiscal Year

Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year

Tokyo Stock Exchange Prime Market

March

Real Estate

1,000 or more

¥100 billion or more but less than ¥1 trillion

10 or more but fewer than 50

4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder

―――

5. Other Special Circumstances That May Have Material Impact on Corporate Governance

―――

II. Business Management Organization and Other Corporate Governance Systems regarding Decision- making, Execution of Business, and Oversight in Management

1. Organizational Composition and Operation

	Corporate Governance System				Company with Audit and Supervisory Board

[Directors]

Number of Directors Stipulated in Articles ofIncorporation

Directors' Term of Office Stipulated in Articlesof Incorporation

Chairperson of the Board

15

2 years President

Number of Directors	Updated			11

	Election of Outside Directors				Elected
	Number of Outside Directors				3
	Number of Independent Directors				3

Relationship with the Company (1) Updated

Name	Attributes			Relationship with the Company*
a	b	c	d	e	f	g	h	i	j	k

Hiroshi Matsuzawa	From another company
Takeshi Hanai	From another company
Sayaka Eguro	From another company

• Categories for "Relationship with the Company."
• Use "" when the director presently falls or has recently fallen under the category; "" when the director fell under the category in the past
• Use "⚫" when a close relative of the director presently falls or has recently fallen under the category; "" when a close relative of the director fell under the category in the past

1. Person who executes business of the Company or a subsidiary
2. Person who executes business or a non-executive director of a parent company
3. Person who executes business of a fellow subsidiary
4. Person/entity for which the Company is a major client or a person who executes business for such person/entity
5. Major client of the Company or a person who executes business for such client
6. Consultant, accounting expert, or legal expert who receives large amounts of cash or other assets in addition to director/Audit and Supervisory Board Member compensation from the Company
7. Major shareholder of the Company (in cases where the shareholder is a corporation, a person who executes business of the corporation)
8. Person who executes business for a client of the Company (excluding persons categorized as any of d, e, or f above) (applies to self only)
9. Person who executes business for another company that has a relationship of mutual appointment of outside officers with the Company (applies to self only)
10. Person who executes business for an entity receiving contributions from the Company (applies to self only)
11. Other

Relationship with the Company (2) Updated

			Designation as		Supplementary
	Name		Independent		Explanation of the			Reasons for Appointment
			Director		Applicable Relationship
								With expertise in housing marketing, he has been elected as
								outside Director to utilize his knowledge in the management of our
	Hiroshi Matsuzawa				Not applicable.		Company. In addition, as there is no special interest relationship
								with our Company and no risk of conflict of interest with general
								shareholders, he is nominated as independent Director.
								With a wealth of experience and knowledge in management,
								finance, and corporate governance, he has been elected as
								outside Director to strengthen supervision of business execution
	Takeshi Hanai				Not applicable.		by utilizing his experience.
								In addition, as there is no special interest relationship with our
								Company and no risk of conflict of interest with general
								shareholders, he is nominated as independent Director.
								With a high degree of expertise and knowledge in corporate legal
								affairs as an attorney at law, and considerable experience and
								knowledge in a company's legal affairs and compliance, etc., he
	Sayaka Eguro				Not applicable.		has been elected as outside Director to strengthen supervision of
				business execution by utilizing his experience.
								In addition, as there is no special interest relationship with our
								Company and no risk of conflict of interest with general
								shareholders, she is nominated as independent Director.

Voluntary Establishment of Committee(s)

equivalent to Nomination Committee orNot Established Remuneration Committee

[Audit & Supervisory Board Members]

Establishment of Audit & Supervisory Board Established

	Number of Audit and Supervisory Board				4
	Members Stipulated in Articles of Incorporation
	Number of Audit and Supervisory Board				3
	Members

Cooperation among Audit and Supervisory Board Members, Accounting Auditor and the Internal Audit Division

Audit and Supervisory Board Members, the Accounting Auditor, and the Internal Audit Office conduct rigorous audits in their respective areas of responsibility, and also cooperate with each other by exchanging opinions on audit plans and results as needed to further improve audit quality. Audit and Supervisory Board Members cooperate with the Internal Audit Office by accompanying audits conducted by the Internal Audit Office on each business site and providing advice and guidance, and upon receiving internal audit reports submitted by the Internal Audit Office to the President, confirming and advising on the status of improvement. Audit and Supervisory Board Members and the Internal Audit Office are located in the same office, allowing them to exchange information as needed. Audit and Supervisory Board Members cooperate with the Accounting Auditor, Deloitte Touche Tohmatsu LLC, by receiving explanations and reports on the audit plan, the progress of audit procedures during the term, and audit results, while including the Internal Audit Office in the parties for consultation as needed.

	Election of Outside Audit and Supervisory				Elected
	Board Members
	Number of Outside Audit and Supervisory				2
	Board Members
	Number of Independent Audit and Supervisory				2
	Board Members

Relationship with the Company (1)

Name

Attributes

Relationship with the Company*

a

b

c

d

e

f

g

h

i

j

k

l

m

Michinaga Tsukakoshi

From another company

Shinji Sato

Certified public accountant

• Categories for "Relationship with the Company."
• Use "" when the director presently falls or has recently fallen under the category; "" when the director fell under the category in the past
• Use "⚫" when a close relative of the director presently falls or has recently fallen under the category; "" when a close relative of the director fell under the category in the past

1. Person who executes business of the Company or a subsidiary
2. A non-executive director or an accounting advisor of the Company or its subsidiaries
3. Person who executes business or a non-executive director of a parent company
4. An Audit and Supervisory Board Member of a parent company of the Company
5. Person who executes business of a fellow subsidiary
6. Person/entity for which the Company is a major client or a person who executes business for such person/entity
7. Major client of the Company or a person who executes business for such client
8. Consultant, accounting expert, or legal expert who receives large amounts of cash or other assets in addition to director/Audit and Supervisory Board Member compensation from the Company
9. Major shareholder of the Company (in cases where the shareholder is a corporation, a person who executes business of the corporation)
10. Person who executes business for a client of the Company (excluding persons categorized as any of f, g, or h above) (applies to self only)
11. Person who executes business for another company that has a relationship of mutual appointment of outside officers with the Company (applies to self only)
12. Person who executes business for an entity receiving contributions from the Company (applies to self only)
13. Other

Relationship with the Company (2)

			Designation as			Supplementary Explanation
	Name		Independent			of the Applicable			Reasons for Appointment
			Director			Relationship
									He has been elected as outside Audit and Supervisory Board
									Member to apply his extensive experience and expertise in
	Michinaga Tsukakoshi				Not applicable.		management and finance to the Company's audits. In
				addition, as there is no special interest relationship with our
									Company and no risk of conflict of interest with general
									shareholders, he is nominated as independent Director.
									He has been elected as outside Audit and Supervisory Board
									Member to apply his expertise in finance and accounting to
	Shinji Sato				Not applicable.		the Company's audits, as a certified public accountant. In
				addition, as there is no special interest relationship with our
									Company and no risk of conflict of interest with general
									shareholders, he is nominated as independent Director.